|CORAM:||B. Ramakotiah (AM), Saktijit Dey (JM)|
|CATCH WORDS:||derived from the undertaking|
|DATE:||November 21, 2014 (Date of pronouncement)|
|DATE:||December 3, 2014 (Date of publication)|
|AY:||2008-09 & 2009-10|
|FILE:||Click here to download the file in pdf format|
|S. 80-IB: Excise duty refund is "derived" from the undertaking. Liberty India 316 ITR 218 (SC) is distinguishable|
The AO has denied 80IB deduction on excise duty refund for the sole reason that it cannot be treated as income derived from eligible business of the undertaking. However, as can be seen from the facts brought on record, there is no dispute that assessee has paid the excise duty on the goods manufactured and sold and as such it forms part of the sale price of assessee. Therefore, payment of central excise duty is integrally connected with the manufacturing and sale of goods produced by assessee. It is also not in dispute that as per the industrial policy resolution declared for the state of J&K and consequent to Central Excise Department Notification, assessee became eligible for refund of excise duty paid after set off of CENVAT credit. Therefore, in sum and substance, it is only a refund of an amount already paid by assessee and reduced from the sale price while computing the profit. Therefore, when assessee gets refund of an expenditure already incurred the same has to be deemed to be the profits and gains of business or profession carried on by assessee in terms of section 41(1)(a) of the Act. In that view of the after, excise duty refund received by assessee has to be treated as part of the business profit, hence, eligible for deduction u/s 80IB of the Act. Otherwise also, as payment of excise duty is directly linked with the manufacturing of goods, refund of excise duty has to be treated as income derived from eligible business as provided u/s 80IB. In the aforesaid view of the matter, assessee will be eligible to claim deduction u/s 80IB on the income accruing from refund of excise duty. So far as the ratio in case of Liberty India Vs. CIT 316 ITR 218, the facts are clearly distinguishable and do not apply to the facts of the present case. In case of Liberty India 316 ITR 218, the hon’ble Supreme Court was considering the profits derived from sale/transfer of DEPB/Duty Draw Back Benefits. DEPB/Duty Draw Back Benefits, is given under a scheme framed under the Customs Act and it is transferable, in other words, it is a marketable commodity. Excise duty refund by assessee in the present case is neither a marketable commodity nor transferable. It is only a refund of expenditure already incurred by assessee, hence the decision of the Hon’ble Supreme Court in case of Liberty India (supra) will not apply.